CompuServe tests buffet pricing

CompuServe, which has reinvented itself more than once in the past year, is now testing the waters for a flat-rate pricing structure.

July 30, 19977:15 PM PDT

CompuServe(CSRV), which has reinvented itself more than once in the past year, is now testing the waters for a flat-rate pricing structure.

But lest critics take this as a sign, company spokesman Steve Conway reassures that this test does not mean the online company is abandoning its current strategy of attracting business and professional users.

In fact, CompuServe's foray into the world of mainstream consumer access was a dismal failure. Last year it killed its Wow service, vowing to focus on its core business, serving professionals willing to pay a little more for higher-quality service.

CompuServe now charges $9.95 a month for the first five hours with an hourly charge of $2.95 after that. It also has a pricing scheme for heavy users in which members pay $24.95 for the first 20 hours and $1.95 for each following hour.

The flat-rate prices it is now testing range from $24.95 to $27.95, putting the service several dollars over the monthly industry standard, Conway said. Most Internet access providers, including its prime competitors America Online and Microsoft Network charge $19.95 a month for unlimited access.

Even if CompuServe goes to flat-rate pricing, it won't go that low, Conway said. "We're not testing that [price] and there's a reason we're not testing that. We know from past experience it's unprofitable. It really does not make sense to test at that level."

Both AOL and MSN are in a constant search for new revenue sources because they have acknowledged that they can't turn a profit by access fees alone at their current rates.

Conway added that CompuServe regularly tests new pricing schemes to see what the market will bear and that any new pricing model would take at least a few months to be introduced.

The online service has come under fire in the last several months for shifting its strategy, losing its CEO, trying to find a home outside its parent company, H&R Block, and losing money. But Conway said that the company is in a strong cash position with $160 million in cash.

CompuServe, which has 2.8 million members on its flagship online service, has had flat growth in the United States compared with exponential growth of AOL. However, "We've grown like crazy in Europe," Conway added.

CompuServe also has one of the best rates of connectivity among the top Internet service providers, while AOL has the worst.

"Periodically, we test pricing schemes in the marketplace to sense where things are, where the elasticity of pricing is in the market," Conway elaborated. "Our hypothesis, which has to be proven one way or another with the test, is for [the business and professional] crowd, we have some value that a mass consumer online service doesn't have. What we need to determine is what does that correspond to in the way of pricing."